Correlation Between Grand River and Century Financial
Can any of the company-specific risk be diversified away by investing in both Grand River and Century Financial at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Grand River and Century Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Grand River Commerce and Century Financial Corp, you can compare the effects of market volatilities on Grand River and Century Financial and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Grand River with a short position of Century Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Grand River and Century Financial.
Diversification Opportunities for Grand River and Century Financial
0.42 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Grand and Century is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Grand River Commerce and Century Financial Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Century Financial Corp and Grand River is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Grand River Commerce are associated (or correlated) with Century Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Century Financial Corp has no effect on the direction of Grand River i.e., Grand River and Century Financial go up and down completely randomly.
Pair Corralation between Grand River and Century Financial
Given the investment horizon of 90 days Grand River Commerce is expected to under-perform the Century Financial. But the otc stock apears to be less risky and, when comparing its historical volatility, Grand River Commerce is 1.34 times less risky than Century Financial. The otc stock trades about -0.03 of its potential returns per unit of risk. The Century Financial Corp is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 2,730 in Century Financial Corp on November 2, 2024 and sell it today you would earn a total of 1,265 from holding Century Financial Corp or generate 46.34% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 75.91% |
| Values | Daily Returns |
Grand River Commerce vs. Century Financial Corp
Performance |
| Timeline |
| Grand River Commerce |
| Century Financial Corp |
Grand River and Century Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Grand River and Century Financial
The main advantage of trading using opposite Grand River and Century Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Grand River position performs unexpectedly, Century Financial can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Century Financial will offset losses from the drop in Century Financial's long position.| Grand River vs. FS Bancorp | Grand River vs. Eastern Michigan Financial | Grand River vs. Bank of Botetourt | Grand River vs. FNB Inc |
| Century Financial vs. Eastern Michigan Financial | Century Financial vs. Grand River Commerce | Century Financial vs. Bank of Botetourt | Century Financial vs. FNB Inc |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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